OLDWICK - MAY 11, 2018A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” of Scotia Reinsurance Limited (Scotia Re) (Barbados). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Scotia Re’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect rating enhancement from the company’s ultimate parent, The Bank of Nova Scotia.

Scotia Re is primarily a life reinsurance subsidiary that assumes non-Canadian business largely from Mexico, South and Central America, and the Caribbean sourced through its banking parent. The initial book of business was assumed the previous year from its sister company, Scotia Insurance (Barbados) Limited, which has a long history of favorable underwriting results. The company’s balance sheet strength is bolstered further by the strongest level of risk-adjusted capitalization, reflecting in part a highly conservative investment portfolio.

These strengths are offset partially by the company’s dependence for growth on consumer loan originations in economies outside of Canada, many of which are deemed to have elevated country risk profiles. Furthermore, a high dividend payout ratio results in a lack of absolute capital growth. A.M. Best notes, however, that in a stress scenario, Scotia Re could recapitalize by adjusting its shareholder dividend payout.